Swiss Watchmakers Running Ahead Of Others In Asia

By Martin Gelnar

Fabrice Coffrini/AFP/Getty Images

Historic models of Swatch brand watches are displayed at the Swatchgroup stand at Baselworld 2010 in Basel, Switzerland, in March.

Switzerland’s watchmakers have had a good ride in the past few months thanks to Asian demand: exports to Hong Kong, China and Singapore are up between 40% and 75% for the first seven months of this year.
What’s more surprising, though, is a whopping 30% surge in exports to Japan in July, a market long considered to be dead in the water.
Statistical inconsistencies aside, this is the first sign that the Japanese market may be in for a turnaround. The country, which is still the world’s second largest luxury market after the U.S., is expected to return to modest growth rates in the next few years. With an increasing number of senior citizens and well-heeled single women, luxury spending in the brand-conscious country should continue to rise.

But Japan, of course, isn’t the main story. And that is China. Its appetite for Western luxury items seems as insatiable as the country’s rise to global superpower status seems inevitable. Further strengthening of the yuan would likely boost Chinese spending on anything that oozes with Western lifestyle.

But what if Chinese consumers kick the habit at some stage? Given the potential for luxury taxes and other obstacles, should one expect Chinese growth to collapse at some stage? Bear in mind that that’s what the Japanese market did not too long ago once Western high-end brands exhausted their potential.

Even if that were true, there are still opportunities aplenty.

Taking a look at Swiss watchmakers’ sales by country, one thing that’s striking is that India ranks a distant 24th, behind much smaller countries such as Austria, Portugal and the Netherlands. True, most wealthy Indians buy their watches on visits to Switzerland, which of course aren’t included in export figures. But odds are that sooner or later, Indian’s masses will get hooked on Swiss watches, too.

So, are Asia’s markets a sure growth bet for the likes of Rolex, Swatch Group AG and Compagnie Financiere Richemont SA? Definitely, at first glance. But changes in technology or spending patterns can happen overnight. Remember the cheap Japanese quartz watches that became a hot fashion item in the 1970s and almost pushed Switzerland’s established manufacturers into ruin? There’s no guarantee that mechanical watches, the pride of Swiss watch making, will enchant consumers around the world forever.

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